In the first two months of 2026, Volkswagen has achieved the top spot in China's car sales, overtaking both Geely and BYD. According to data from the China Passenger Car Association (CPCA), Volkswagen, through its Chinese joint ventures FAW and SAIC, secured a cumulative market share of 13.9%. Close behind is Geely with a market share of 13.8%. Toyota, with its GAC and FAW joint ventures, held the third position with a 7.8% market share, while BYD followed with a 7.1% share.
China’s overall car sales experienced a significant downturn in the initial months of 2026, dropping by 26%. This decline is attributed largely to the reduction in government incentives for electric vehicles (EVs) and plug-in hybrid electric vehicles (PHEVs). In February 2026 alone, sales plummeted by 34% to 950,000 vehicles.
BYD, which led car sales in China in both 2024 and 2025, saw its market share fall to 7.1% in the first two months of 2026. This marks the steepest sales decline for the manufacturer since the COVID-19 pandemic in 2020. Despite this setback, BYD remains the best-selling electric car manufacturer globally.
The reinstatement of a 5% purchase tax on new energy vehicles, announced in late 2025, is a major factor behind the declining sales of EVs and PHEVs in China. Previously, these vehicles enjoyed a 10% tax exemption, which stimulated demand. The policy change has particularly affected automakers that specialised in affordable plug-in hybrids and EVs, which relied heavily on government subsidies.
Cui Dongshu, secretary-general of the CPCA, explained to Reuters that in 2026, many potential buyers opt for strong hybrids instead of plug-in hybrids. As subsidies for plug-in hybrids and EVs diminished, these automakers suffered the most from the policy shift. These changes signal a resurgence for legacy automakers in the Chinese market.